Anyone who’s ever been involved in a building project that’s gone wrong will appreciate the importance of adequate insurance cover in the construction industry. Whether it’s storm damage to a roof in your newly built guest bedroom, or a bridge collapsing and causing injuries, the list of things that can go wrong during construction is a long one. You can’t afford to be working in this space without the proper insurance. Similarly, it’s critical for anyone planning a construction project – whether commercial or at home – to have the correct cover in place.
What is contractor’s all risk cover?
A Contractor’s All Risk insurance policy is appropriate for most kinds of construction projects. It includes anything from private houses, cluster homes and small blocks of flats up to large-scale projects such as shopping centres, sugar mills, power stations and refineries. It also covers infrastructure builds such as bridges, roads, dams, water reticulation and pipelines.
This kind of insurance caters to a very specific market segment with unique insurance requirements. It is essential for general building contractors and is also worth considering for trades such as electricians, plumbers and heating and ventilation contractors.
What does the policy cover?
This type of policy typically covers construction works against damage caused by storms, fire, water, subsidence, collapse, landslips, earthquakes, cyclones, theft, transit and malicious actions. As with all insurance, Contractor’s All Risk cover has its limitations even though it has ‘all risk’ in its name. Take the time to discuss various scenarios or concerns with your adviser; he or she will be able to provide a clear overview of what is and isn’t covered.
Also note that existing structures are not covered when doing alterations and additions. However, there should already be an insurance policy to cover these, which should remain effective while work is taking place. Just be sure to tell your insurer about the project before it starts.
How are premiums calculated?
As a contractor, you usually buy insurance on an annual basis to cover all the work you will do throughout the year. Premiums are based on your annual turnover, but the policy limits required and excess level will have an impact on how much is charged. If you have made any previous Contractor’s All Risk Insurance claims, the number of claims and amounts involved may also affect the premium.
Insurance can also be bought on a short-term basis to cover single projects, but it is usually more cost-effective to buy it annually.
What should homeowners consider?
Many people who are commissioning a building project for the first time forget to check the insurance status of their contractor. This is a common mistake that can lead to significant financial losses if things go wrong. If you are planning a home renovation or new build, it’s worth asking if your contractor has insurance for the following:
- Contract works
This will cover your contractor for sudden and unforeseen physical loss or damage from any cause to the insured property other than those specifically excluded.
- Public liability insurance
This will cover your contractor’s legal liability for damages to the property of others or bodily injury to a member of the public while carrying out their works.
Also discuss the nature of your project and any concerns you may have with your adviser. He or she can help you to check your home insurance policy and inform your insurer that you are undertaking a building project. Note that your insurer may want to know which contractor you’re using and what insurance they have. In some cases, you may need to pay higher premiums during the project and even after the work is completed.
Adequate cover provides peace of mind
Construction projects are often lengthy and expensive – and may at times become quite stressful. Avoid unnecessary and additional costs by making sure you’re covered for unforeseen loss or damage.
AUTHOR: Bertus Visser, Chief Executive of Distribution, PSG Insure